Bond trading surges as DSE shares lose 806/-bn in October

By Costantine Muganyizi

Trading in government securities strengthened sharply on the Dar es Salaam Stock Exchange (DSE) in October, contrasting with declining equity valuations following September’s record market capitalisation, according to market data covering trading through October 23.

Bond turnover more than doubled between the weeks ending October 9 and October 23, rising from TSh77.35 billion to TSh155.12 billion. Meanwhile, the exchange’s total market capitalisation declined by TSh806.29 billion between October 2 and October 23, from TSh40.38 trillion to TSh39.57 trillion.

Analysts said the figures point to divergent trends across Tanzania’s capital market, with fixed-income securities recording stronger transaction activity as share valuations came under pressure.

The decline follows a strong September, when the DSE’s total market capitalisation reached a record TSh40.57 trillion on September 30, reflecting the growing valuation of listed companies. The subsequent October correction has reduced the market’s total value by about TSh1 trillion from that month-end level by October 23.

Bond trading, however, gathered momentum during the second half of October. Turnover rose to TSh132.55 billion in the week ending October 16 before reaching TSh155.12 billion in the week ending October 23.

The latest weekly figure represented a 17.03 percent increase from the previous week’s TSh132.55 billion, indicating that activity in the fixed-income segment continued to strengthen.

“Higher turnover does not necessarily mean that investors injected an equivalent amount of new money into government securities,” said a market analyst who requested anonymity. “Turnover reflects the value of transactions, including the resale of existing securities, and does not in itself show whether investors shifted funds from equities into bonds.”

On the equity side, the DSE All Share Index (DSEI) fell from 4,631.77 points on October 2 to 4,539.27 points on October 23, a decline of approximately two per cent. The DSEI is a measure of how the share prices of companies listed on the bourse are performing overall. In simple terms, it works like a thermometer for the stock market: it helps show whether share prices are generally rising or falling.

Total market capitalisation dropped by about two percent over the same period, reflecting the weakening valuation of listed shares.

Equity trading, meanwhile, showed signs of recovery after slowing in the middle of the month. Turnover increased from TSh12.94 billion in the week ending October 16 to TSh16.85 billion in the week ending October 23, a 30.16 percent rise.

Despite the rebound, turnover remained below the TSh18.02 billion recorded in the week ending October 9, suggesting that the recovery in trading activity had yet to reverse the broader downward trend in share valuations.

Foreign investor activity added to the pressure on equities. In the week ending October 23, foreign investors accounted for 4.20 percent of equity purchases but 25.28 percent of sales, resulting in net selling of about US$1.34 million.

Domestic investors accounted for most purchases, helping absorb shares offered for sale. The market’s performance was not uniformly negative. Domestic market capitalisation increased by 0.35 percent to TSh27.50 trillion in the week ending October 23, while the Industrial and Allied Index rose 3.21 percent.

Selected stocks also registered gains, demonstrating that opportunities persisted in individual counters despite the wider market correction.

Banking stocks were among the sources of pressure on the DSE in October, with the Banks, Finance and Investment Index falling 4.05 percent from 23,382.10 points at the end of September to 22,436.18 points on October 23.

Performance among individual counters was mixed. CRDB Bank gained 2.47 percent in the week ending October 23, closing at TSh2,900, while NMB Bank fell 2.01 percent to TSh1,950. Other lenders, including DCB Commercial Bank, Mwalimu Commercial Bank and MUCOBA Bank, also recorded weekly declines. The sector’s overall performance contrasted with September, when the banking index gained 3.29 percent, suggesting that some of the previous month’s gains were reversed during October.

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